How Robber Barons hijacked the “Victorian Internet”

Ars revisits those wild and crazy days when Jay Gould ruled the telegraph and …

As the Ars team convenes for two days of meetings in Chicago, we're reaching back into the past to bring you some of our favorite articles from years gone by. This feature originally ran in December 2009.

It was 1879, and investor Charles A. Sumner sat at his desk, frustration pouring onto the page through his ink pen. Sumner, business partner to the radical economist and journalist Henry George, was finishing the concluding passages of a book about what had happened to the telegraph, or the Victorian Internet, as one historian calls it.

"This glorious invention was vouchsafed to mankind," he wrote, "that we might salute and converse with one another respectively stationed at remote and isolated points for a nominal sum."

But instead, he continued, "A wicked monopoly has seized hold of this beneficent capacity and design, and made it tributary, by exorbitant tariffs, to a most miserly and despicable greed."

It's a largely forgotten story, but one that still has relevance today. If you follow debates about broadband policy, you know that there are two perspectives perennially at war with each other. One seeks some regulation of the dominant industries and service providers of our time. The other seeks carte blanche for the private sector to do as it sees fit. Nowhere does the latter camp press this case harder than when it comes to network neutrality on the Internet, and appeals to the Founding Fathers aren't unknown.

"Our founding fathers understood that it is government that takes away people's freedoms, not individuals or companies," wrote entrepreneur Scott Cleland in an opinion piece for National Public Radio not long ago. Cleland opposes the Federal Communications Commission's proposals to codify into rules its principles prohibiting ISPs from discriminating against certain applications.

"At the core, the FCC's proposed pre-emptive 'net neutrality' regulations to preserve an 'open Internet' are not at all about promoting freedom but exactly the opposite. Freedom is not a zero sum game, where taking it away from some gives more to others. Taking away freedoms of some takes away freedom from all."

Reading this argument, one wonders if there ever was an age when the hands-off school of regulation got exactly what it seems to want—a network environment largely untarnished by public oversight.

In fact, there was such a time.

Hayessociated Press

Rutherford Hayes

Library of Congress

Three years before Sumner wrote his lament, the country was wracked by the most convulsive presidential election since the outbreak of the Civil War: Democrat Samuel Tilden of New York versus Republican Rutherford B. Hayes of Ohio. The Republican party had split between loyalists to the administration of Ulysses S. Grant and those appalled by its corruption. In truth, the resurgent Democrats were no better when it came to civic virtue, but they lured some Republicans away with Tilden, who famously battled bribery and graft as governor of New York.

When, on that November night in 1876, the popular results indicated a narrow majority for the reform candidate, many assumed the first Democratic victory in two decades. But not so at one of the Associated Press's most prestigious affiliates, the ardently pro-Republican New York Times. When prominent Democrats nervously contacted the Times asking for an update on the results, its managing editor John Reid realized that the election was still in doubt. He contacted top Republican party officials and had them spread the word via telegram—the electoral college votes in Florida, Louisiana, and South Carolina were still in play.

It was easy for these men to access the telegraph system, because its main operator, Western Union, was also militantly pro-Republican. During the long controversy in Congress over who actually won the districts in the disputed election of 1876, Western Union secretly siphoned to AP's general agent Henry Nash Smith the telegraph correspondence of key Democrats during the struggle. Smith, in turn, relayed this intelligence to the Hayes camp with instructions on how to proceed. On top of that, AP constantly published propaganda supporting the Republican side of the story. Meanwhile, Western Union insisted that it kept "all messages whatsoever . . . strictly private and confidential."

Tilden supporters weren't fooled. By the end of the debacle—Hayes having won the White House—they called AP "Hayessociated Press."

The great giveaway

A Union Pacific advertisement

It was no secret why Western Union sided with Republicans. By the 1870s, the Party of Lincoln (Abe himself being a former railroad lawyer) had given away massive quantities of land for the construction of railroads and telegraphs: almost 130 million acres (about seven percent of the continental United States) was granted to eighty enterprises. Although the telegraph had been pioneered by Samuel Morse in the 1840s, the innovation didn't really take off, economically speaking, until it partnered with the railroads, at which point it became the Victorian era's version of our information superhighway.

The Pacific Railroad Act of 1862 sped up the construction of a coast-to-coast railroad system, and it further subsidized telegraph growth as well. But Congress provided very little regulation or oversight for the largesse.

The result was the infamous Credit Mobilier scandal of the 1870s, a scheme that bears some resemblance to the Enron debacle of 2001. Rather than license the construction of the Union Pacific railroad to an independent contractor, its Board of Directors farmed the work out to Credit Mobilier, a company that was, essentially, themselves. In turn, Credit billed the UP vastly more than the actual cost of the project. To keep Congress quiet about the affair, the firm offered stock in itself to Representatives and Senators of any political persuasion at bargain basement prices.

In this context, it should come as no surprise that the nation's telegraph system quickly fell into the hands of one of the most notorious schemers of the Gilded Age.

Matthew Lasar
Matt writes for Ars Technica about media/technology history, intellectual property, the FCC, or the Internet in general. He teaches United States history and politics at the University of California at Santa Cruz. Emailmatthew.lasar@arstechnica.com//Twitter@matthewlasar

167 Reader Comments

Originally posted by Prelator:Fantastic article. As a strong conservative Republican, I am constantly disappointed how Republicans in Congress have completely missed the fact that net neutrality should be a conservative issue. Conservatives are always talking about how bad "big government" is, and I hate big government as much as any other conservative. But they forget that what makes big government evil is not the fact that it's big or the fact that it's government, but centralization of power.

Anytime you have that much power vested in a single entity, it is bound to be abused. That is why checks and balances are needed to prevent abuse. In a world where private companies now exercise more power over individual lives and liberties than most governments ever could have hoped to do in the past, restraint on corporate power is every bit as necessary as restraint on government power. And it just so happens that government is in the best position to serve as a check to corporate power in cases like net neutrality.

I've actually written a blog post on why conservatives should support net neutrality for precisely this reason, which you can read here.

Bravo, sir. If the "Republican" politicians out there were following this thought process, then I'd be proud to become a Republican. The current party does not seem to have any issue at all with centralized power, as long as it's a private company.

And to Scott Cleland: I can switch from using Google to any other search in about 5 seconds. I can even use different sites simultaneously. How is that comparable to changing ISPs, if there's even another broadband option in my area?

But instead, he continued, "A wicked monopoly has seized hold of this beneficent capacity and design, and made it tributary, by exorbitant tariffs, to a most miserly and despicable greed."

Great article. This all would be so hilarious if it were not happening again right now. Often with no other options to get high speed internet the companies like Cox and Comcast can rape us for all the cash they want.

quote:

"At the core, the FCC's proposed pre-emptive 'net neutrality' regulations to preserve an 'open Internet' are not at all about promoting freedom but exactly the opposite. Freedom is not a zero sum game, where taking it away from some gives more to others. Taking away freedoms of some takes away freedom from all."

Freedom? Freedom for who and to do what? Freedom for customers? To get raped for overly inflated prices for services that are purposefully handicapped by the companies that provide them? Freedom for the tel-cos and broad band providers to charge as much as they want and to discriminate against who ever they want? Because those are the only kind of freedoms I can see here.

And it just so happens that government is in the best position to serve as a check to corporate power in cases like net neutrality.

And will government do that?

quote:

However government is ostensibly in the service of the common good and ultimately beholden to the voter.

quote:

Government wants to safeguard ALL public resources and freedoms, and voters will reward/punish government appropriately.

quote:

As corrupt and inefficient as the government seems to be, it is really our only recourse for protecting our freedoms and maintaining a free market place due to the fact that the government is ultimately accountable to the people.

Is that how governments operate in the real world? Or are they more responsive to the interests of the powerful?

Your questions are very valid, but I guess it comes down to which would you choose from:A) Government beholden to voters that may be corrupt.B) Business beholden to profit.

I was going to say beholden to customers, but once they're a monopoly, customers don't really get a choice anymore. It's them or nothing.

They are the only ones that can in a situation such as this one where there is not nearly enough opportunity for consumer friendly competition to handle the issues on its own.

quote:

Originally posted by ehanneken:Is that how governments operate in the real world? Or are they more responsive to the interests of the powerful?

Both.

It all depends on who is in charge. Both the US and many other governments across the world are full of both success and failure...just like the private industries. Like the private industries, the success entirely depends on who is in charge. Since those who are selected to be in charge within government almost entirely depends on the voters it means that we have a very crucial responsibility that far too few take seriously even though many think that they do. Remember, we are the real government. They are simply elected officials despite how much some of them like to think that they are more than just that.

In other words, go out and vote and make sure you vote responsibly. If you are the type that either stays home or just votes a straight Democrat or Republican ticket without doing your research then shame on you. YOU are the government and YOU are not doing your job! You need to fact check. You need get your info from many sources. You need to read history. Do not fail yourself, your family, or your neighbors. Do...your...job.

The only REAL way to bring prices into line and give us openness is to regulate sensibly.

quote:

And it just so happens that government is in the best position to serve as a check to corporate power in cases like net neutrality.

And will government do that?

quote:

However government is ostensibly in the service of the common good and ultimately beholden to the voter.

quote:

Government wants to safeguard ALL public resources and freedoms, and voters will reward/punish government appropriately.

quote:

As corrupt and inefficient as the government seems to be, it is really our only recourse for protecting our freedoms and maintaining a free market place due to the fact that the government is ultimately accountable to the people.

Is that how governments operate in the real world? Or are they more responsive to the interests of the powerful?

If they are, we only have ourselves to blame. After all, the US government is a democracy.

Tell me, what alternative do we have? Trust the [not so] free markets and business which simply don't care about our freedoms? You seem to be sidestepping the real issue here.

Originally posted by chronomitch:If they are, we only have ourselves to blame. After all, the US government is a democracy.

Tell me, what alternative do we have? Trust the [not so] free markets and business which simply don't care about our freedoms? You seem to be sidestepping the real issue here.

Um, no it's not a democracy, it's a representative republic.

The alternative is to handle it on a state/local level. Franchise agreements, last I checked, are not given out by the Federal Gov't, they are given out by local gov'ts so they are the ones that need to fix/prevent the problem, not the Feds. Basically if you have an issue because there is a ISP monopoly in your city because your city gave them a bad contract then that is your problem, and your responsibility to fix, not mine and I don't want your regulation in my area where everything is just fine because we did our contracts right.

The alternative is to handle it on a state/local level. Franchise agreements, last I checked, are not given out by the Federal Gov't, they are given out by local gov'ts so they are the ones that need to fix/prevent the problem, not the Feds. Basically if you have an issue because there is a ISP monopoly in your city because your city gave them a bad contract then that is your problem, and your responsibility to fix, not mine and I don't want your regulation in my area where everything is just fine because we did our contracts right.

if it's not a federal issue, then the telcos will go nuts with suing every municipality that wants to roll out their own fiber to get away from the apathetic monopolists and their bad service. if it's federal, then the telcos only need to be told to cut it out once, instead of letting them do it over and over across the country and possibly win some of those because they were able to bribe someone in power.

if your area did it right, it should be used as a model to fix everywhere that wasn't so fortunate.

For a fantasy story inspired by this, take a look at _Going Postal_ by Terry Pratchett. For more on how the railroads screwed everybody else out of their money, see _Nothing Like it in the World_ by Stephen E Ambrose.

Originally posted by mltdwn:The alternative is to handle it on a state/local level. Franchise agreements, last I checked, are not given out by the Federal Gov't, they are given out by local gov'ts so they are the ones that need to fix/prevent the problem, not the Feds. Basically if you have an issue because there is a ISP monopoly in your city because your city gave them a bad contract then that is your problem, and your responsibility to fix, not mine and I don't want your regulation in my area where everything is just fine because we did our contracts right.

The general idea is that part of the reason the FCC was created is so those kinds of bad contracts were never supposed to be permitted to created by the local/state governments in the first place since they kill market friendly competition. Unfortunately, the wrong people were put in charge of the FCC in 2001 and look where it got us? The FCC and its purpose might as well have not existed during those years.

In other words, it is not a local problem. It is a federal problem. I also agree with the previous poster. If your town did it right then perhaps the FCC can learn using your fine example.

The alternative is to handle it on a state/local level. Franchise agreements, last I checked, are not given out by the Federal Gov't, they are given out by local gov'ts so they are the ones that need to fix/prevent the problem, not the Feds. Basically if you have an issue because there is a ISP monopoly in your city because your city gave them a bad contract then that is your problem, and your responsibility to fix, not mine and I don't want your regulation in my area where everything is just fine because we did our contracts right.

if it's not a federal issue, then the telcos will go nuts with suing every municipality that wants to roll out their own fiber to get away from the apathetic monopolists and their bad service. if it's federal, then the telcos only need to be told to cut it out once, instead of letting them do it over and over across the country and possibly win some of those because they were able to bribe someone in power.

if your area did it right, it should be used as a model to fix everywhere that wasn't so fortunate.

Then those municipalities need to straighten out their franchise contracts, it's a matter of personal responsibility in that regard. And yes I think ours should be used as a model, but it should be up to the individual municipalities to take it on, not the Federal Gov't trying to shove it down everyone's throats as what works for one area may not work for another, or be far to costly for another to implement. That's what is supposed to be so great about this nation, if you don't like the laws and regulations of one state/municipality you can move to another so that those who live in the area get the benefits THEY want and not what everyone else thinks they should have.

This isn't a matter of minorities being tread upon, this is simply a matter of some municipalities doing stupid things and the way to fix it is get people into office that will represent the interests of the people in the area, or to get the people that are in office to change the way things are done. That's the great thing about democracies/republics, everyone gets what they deserve, but the issue is I don't want to get what say you deserve because you chose to do it on a Federal level rather than fixing it internally. I don't want to run the risk of being punished with higher cost, worse service, etc. because YOU decided it was necessary for where you live when everything is fine where I am.

Originally posted by Prelator:Fantastic article. As a strong conservative Republican, I am constantly disappointed how Republicans in Congress have completely missed the fact that net neutrality should be a conservative issue. Conservatives are always talking about how bad "big government" is, and I hate big government as much as any other conservative. But they forget that what makes big government evil is not the fact that it's big or the fact that it's government, but centralization of power.

Anytime you have that much power vested in a single entity, it is bound to be abused. That is why checks and balances are needed to prevent abuse. In a world where private companies now exercise more power over individual lives and liberties than most governments ever could have hoped to do in the past, restraint on corporate power is every bit as necessary as restraint on government power. And it just so happens that government is in the best position to serve as a check to corporate power in cases like net neutrality.

I've actually written a blog post on why conservatives should support net neutrality for precisely this reason, which you can read here.

Originally posted by mltdwn:2. It was also a TRUE monopoly where there was no alternative options, most places have at least 2 options if not more (heck I have four where I live in Oklahoma, Cox, SWBell DSL, AT&T FIOS, and Verizon is coming in now as well).

Actually SWBell DSL is AT&T, so we have 2, soon to be 3. None of 'em hold a candle to my old ISP, Liberty Communications. Too bad it's very small.

Where I live I can get Comcast or dsl from att, but the fastest speed they offer is 512/128k(and it is still just as expensive as 15/8mb from comcast) that is effectively useless in this day and age. So my only real option is comcast.

Originally posted by mltdwn:And yes I think ours should be used as a model, but it should be up to the individual municipalities to take it on, not the Federal Gov't trying to shove it down everyone's throats as what works for one area may not work for another, or be far to costly for another to implement.

telcos are vastly larger and wealthier than the average municipality being stuck in these terrible contracts; the threat of state/federal enforcement is required to keep the telcos from strongarming towns into granting them a monopoly and then providing the worst service possible (and the threat does nothing if not actually enforced, as with the hundreds of billions of dollars given to telcos to build infrastructure that was instead used to buy each other up in an attempt to reassemble Ma Bell)

quote:

This isn't a matter of minorities being tread upon, this is simply a matter of some municipalities doing stupid things and the way to fix it is get people into office that will represent the interests of the people in the area, or to get the people that are in office to change the way things are done.

ahahahahah

the two-party system is broken, all the candidates with any chance of winning are crap in one way or another, and anyone on the national level who doesn't fit the media's idea of an acceptable candidate (like Ron Paul, Kucinich, Dean, etc) is either ignored or given continuous hostile treatment of the sort that never happens with the candidates that the media wants to win. Matt Taibbi had an article a couple weeks ago on the political media and their obvious biases

your entire argument is the tired old libertarian bootstraps crap, scaled up to the municipal level. "my town got it right through a combination of dumb luck and a few non-corrupt politicians 30 years ago, why can't everyone else do the same thing?"

I'm sorry, I've read the article and re-read sections, but I don't see any evidence presented that Western Union stole the 1876 election. If a NY Times editor passed on a party officials nervousness to his buddies, that has nothing to do with network neutrality or the dominant position of Western Union.

Henry Nash Smith snooping on telegraph messages is unethical, but how did it influence the election? It's not as if they voted by telegraph, and he stepped in and forged votes.

It seems like you're presenting a half-baked conspiracy theory about how Smith stole the election, and using that as evidence of how dangerous laissez-faire business practices are as if governments are superior.

We have plenty of examples of the U.S. Government using its resources to illegal spy on its citizens, often using communications networks, and even for the purposes of influencing elections. That's far more nefarious than what you allege occurred in 1876.

I appreciate Scott Cleland’s commentary on my article (see above). Before responding, thanks to all you Ars readers for your kind words about my piece. You are a tough, super knowledgeable audience, so your praise means a lot to me.

Scott Cleland writes:

“Where I must take issue and must disagree is that you are apparently trying to imply that my strong free market views do not make room for strong support of strict and vigilant antitrust enforcement against monopolies exploiting their market power and/or acting anticompetitively -- because I have a strong and public record of support for strong antitrust enforcement.”

Thank you for this significant clarification of your position. Indeed, I took your commentary at face value: the founders thought that only government can take away our liberties, a position you seem to endorse. But now I’m intrigued. If you concur that only the government can commit this offense, why do you support anti-trust laws, which restrict the actions of corporations?

And, at the risk of getting really far afield, another question: If the founders actually thought that only government can rob us of liberty, what do you make of Jefferson’s commentaries on slavery, such as this, from his *Notes on Virginia*:

"The whole commerce between master and slave is a perpetual exercise of the most boisterous passions, the most unremitting despotism on the one part, and degrading submissions on the other. Our children see this, and learn to imitate it. . . ."

Originally posted by mltdwn:And yes I think ours should be used as a model, but it should be up to the individual municipalities to take it on, not the Federal Gov't trying to shove it down everyone's throats as what works for one area may not work for another, or be far to costly for another to implement.

I fail to see how passing a federal law which prohibits local/state governments or organizations like rental communities and HOAs from signing contracts which basically force everyone to pay for single provider's service will not work out even for a single area in the US. Such a law will do nothing but keep the markets more free to compete. It will do nothing but help the people. It will only harm those corporations who should never have been permitted to take part in such anti-competitive business practices in the first place.

The problem that is clear throughout all of this isn't a lack of regulation, but that the government was getting involved at all.

Yes, the media was doing all kinds of nasty things during the election, however those are crimes of fraud and contract violation. They are punishable under criminal code without any regulation being needed. And because it affected an election, it's even more so. There are laws to deal with this without regulation.

The problem of the railroads is an excellent example of the government being in something that it has no right to be in. It was the government giving away land, creating artificial monopolies etc. that caused the problem. The corruption came because the government interfered in capitalism at all.

The solution is to prohibit government from anything not directly related to defense of person and property rights. By doing so, and allow capitalism to rule, you don't have these problems and people get what they pay for, not what they can blackmail, pressure, or otherwise convince the government to steal money from one group of people and give to another. (otherwise known as slavery)

So yes, regulation is a really bad idea. But then so is the government being involved at all.

Originally posted by Geminiman:The problem that is clear throughout all of this isn't a lack of regulation, but that the government was getting involved at all.

Yes, the media was doing all kinds of nasty things during the election, however those are crimes of fraud and contract violation. They are punishable under criminal code without any regulation being needed. And because it affected an election, it's even more so. There are laws to deal with this without regulation.

The problem of the railroads is an excellent example of the government being in something that it has no right to be in. It was the government giving away land, creating artificial monopolies etc. that caused the problem. The corruption came because the government interfered in capitalism at all.

The solution is to prohibit government from anything not directly related to defense of person and property rights. By doing so, and allow capitalism to rule, you don't have these problems and people get what they pay for, not what they can blackmail, pressure, or otherwise convince the government to steal money from one group of people and give to another. (otherwise known as slavery)

So yes, regulation is a really bad idea. But then so is the government being involved at all.

The flipside to this argument is that a completely free market (one without any oversight or regulation) is, by its very nature, self-defeating.

The very nature of competition requires there be an eventual winner. In the marketplace, the company/corporation that manages to wrest the top spot for itself is no longer interested in unfettered competition. History has shown, over and over, that when competition in the market produces a 'top dog', this company/corporation uses that power to stifle or absorb other companies that might pose a threat to its position. Thus, we end up with AT&T/Ma Bell, Standard Oil, Railroad barons, etc.

For a truly competitive marketplace, there has to be a balance of freedom for companies to innovate and compete as well as oversight and regulation by an equally powerful entity that has no vested interest in winners or losers.

Summoned to a hearing in the House of Representatives, Western Union's President brushed these concerns aside. "The mere fact of monopoly proves nothing," he declared. "The only question to be considered is, whether those who control its affairs administer them properly and in the interest, first, of the owners of the property, and second, of the public."

Originally posted by Kempai Tai:The flipside to this argument is that a completely free market (one without any oversight or regulation) is, by its very nature, self-defeating.

The very nature of competition requires there be an eventual winner. In the marketplace, the company/corporation that manages to wrest the top spot for itself is no longer interested in unfettered competition. History has shown, over and over, that when competition in the market produces a 'top dog', this company/corporation uses that power to stifle or absorb other companies that might pose a threat to its position. Thus, we end up with AT&T/Ma Bell, Standard Oil, Railroad barons, etc.

For a truly competitive marketplace, there has to be a balance of freedom for companies to innovate and compete as well as oversight and regulation by an equally powerful entity that has no vested interest in winners or losers.

Sadly, we're far from this.

Exactly.

In addition, I would like to add that government involvement and regulation in itself is typically not a bad thing. The problems which occur are a result of corrupt politicians and regulators being placed into power. It is not the regulation itself. When proper regulation is exercised by the right people in government it is a very effective means of countering the natural weaknesses that are inevitable in a capitalistic society. Thereby allowing it to shine the brightest.

The idea that the markets will self regulate as a result of competition alone without any government involvement is ideological fallacy which doesn't work. On the flip side, the same can be said about relying on government regulation alone. Leaning too much in either direction causes big problems. We need proper checks and balances. It really boils down to keeping the right people in charge who are not corrupt individuals.

Originally posted by Geminiman:The problem that is clear throughout all of this isn't a lack of regulation, but that the government was getting involved at all.

Yes, the media was doing all kinds of nasty things during the election, however those are crimes of fraud and contract violation. They are punishable under criminal code without any regulation being needed. And because it affected an election, it's even more so. There are laws to deal with this without regulation.

The problem of the railroads is an excellent example of the government being in something that it has no right to be in. It was the government giving away land, creating artificial monopolies etc. that caused the problem. The corruption came because the government interfered in capitalism at all.

The solution is to prohibit government from anything not directly related to defense of person and property rights. By doing so, and allow capitalism to rule, you don't have these problems and people get what they pay for, not what they can blackmail, pressure, or otherwise convince the government to steal money from one group of people and give to another. (otherwise known as slavery)

So yes, regulation is a really bad idea. But then so is the government being involved at all.

So how would you decide who gets to use the limited resources like frequency bands? Not to mention the utter waste of resources something like having 5 electrical cables to every house and so on.

The optimal solution is for the government to provide the infrastructure (electricity/water/gas/telecom distribution network) and then let the companies compete from there. It has worked very well in Europe and there is no reason to think it would not work well in US.

PS: The post about voter responsibility as well as the article it self are awesome.

Most people contributing to this discussion are comparing real markets (at best) to their ideal government. Not surprisingly, ideal government wins.

I can say a few things in favor of markets. They solve the problem of dispersed knowledge through the coordination mechanism of prices. They solve the problem of no knowledge through trial-and-error and natural selection: businesses that make useless things, or produce them using means that are too costly, are punished by losses; businesses that make the right decisions profit. Those profits are also incentives to innovate, so we can get more by doing less. No central planner can do the things that markets do, at least not nearly as well.

I can also point out ways in which markets tend to fail. Transactions that benefit a buyer and seller sometimes generate external costs that neither principal has an incentive to minimize (e.g., pollution). Conversely, public goods are underproduced.

But notice that when I talk about markets, I'm talking about how their internal logic compels them to operate. If I wanted to defend markets against the charge that they lead to global warming because carbon is a negative externality, it would be silly of me to respond that, well, in the market *I* prefer, businesses wouldn't do that. That's silly. It doesn't matter what I want; markets behave according to what they are.

And yet this is how most people talk about democracy: as if what they wanted mattered. But democracies also behave according to what they are, and they suffer from a collective action problem. Laws that benefit a concentrated minority over a dispersed majority win over their opposites, because concentrated minorities have more incentive to get their facts straight and lobby for their own interests. Bad rules are private goods, while good rules are public goods.

quote:

Tell me, what alternative do we have?

Why do you assume we must have alternatives? Government isn't an alternative. If Congress passes a "net neutrality" law, established and politically-connected businesses will make sure it serves their interests, at least in practice. For a good example of how regulatory crusades end up helping incumbent businesses, see this story on how Mattel used the panic over lead to hurt their smaller competitors.

There is actually one (weak) alternative: exit. Move someplace better, if there is such a place, and if some government doesn't stop you from immigrating. The Seasteading Institute is working on making places with alternative rules to exit to, although it probably won't work, at least not in my lifetime.

This article has a lot of good historical facts, and provides a good narrative, but misses on what actually allowed these events to take place. The error in its conclusion is due to the same misunderstanding of what "free market" proponents actually want, that Scott Cleland (unwittingly?) alluded to in his initial response.

A free market is not one in which monopolists can do anything they want. Rather a free market is one in which government and business are kept separate. Much like freedom of religion means separating church and state by minimizing their influence over each other. Government must create law and order, preventing for example Catholics from burning heretics at the stake and businesses from lying on their balance sheets. But separation also means government must not subsidize or churches or require them to buy expensive permits that some can't afford, and these same principles apply to business.

Looking at the story in this article it is clear that the key moments of tragedy were possible because government was unethically involved in the telegraph and railroad business. Government gave free land to the big railroads and telegraphs, and subsidized their growth. Then telegraphs and railroads were able to maintain their monopoly because corrupted government officials passed regulations that made starting a competing business economically unviable.

This unholy marriage not only prevented government from doing it's job of maintaining a fair competitive environment, but turned it into a weapon of the monopolists.

Of note here is how Jay Gould was able to start small competitive telegraphs, and eventually take over Western Union. When government is not involved with business and does not prevent it, small agile companies are able to compete against large ones and the tension naturally creates the best possible outcome for consumers. Of course Jay Gould was just as eager to unethically use government to his advantage as the large companies he aimed to take over and as he did, the benefits of competition evaporated. This is exactly why government must be structured to stay OUT of business. Free market proponents point to the founding fathers because their stricter interpretation of the constitution provides exactly that structure. In a lawful environment competition happens on it's own, and interference from a government that tries to 'help' end up making things worse. Government's sole role is to make unethical business practices such as exclusive access agreements (as in this story), price fixing and other cartel-type activities illegal and enforce those rules.

Today when free market proponents promote deregulation they are trying to remove the anti-competitive rules that big business has used the government to create. These consist things that sound good, but ultimately make it impossible for the start-up competitor to run his business. Things like expensive permits and certifications whose stated intent is to increase safety, but whose true purpose is to make the industry too costly for new competitors to enter. Regulation supporters on the other hand tend to argue as if deregulation means the removal of all rules.

This disconnect over the meaning of deregulation is what prevents us from agreeing and providing a more united public opinion to the government on what it should do, and just as importantly, what it should not do.

Why do you assume we must have alternatives? Government isn't an alternative.

It is not question of what we "must have" or "must not have". It is a question of what will be the best for the people. A lot of people think the proposed net neutrality rules are at least a strong step in the right direction and I agree.

I agree very much in part because of history which this article by Ars demonstrates, but while that is a cornerstone in my thinking it is not the only reason. Ars has covered virtually every reason why I support this cause. Altogether it just makes sense that it is a much better idea to act now rather than later.

Originally posted by ehanneken:Why do you assume we must have alternatives? Government isn't an alternative. If Congress passes a "net neutrality" law, established and politically-connected businesses will make sure it serves their interests, at least in practice. For a good example of how regulatory crusades end up helping incumbent businesses, see this story on how Mattel used the panic over lead to hurt their smaller competitors.

If net neutrality is going to help those "politically-connected businesses" out in the end, why are those same businesses and their politicians so opposed to it? Perhaps I am overly optimistic, but you are definitely overly pessimistic in regard to our government. Yes, there will always be a certain amount of waste and corruption in regard to government, but why does that mean that we should simply give up on trying to solve problems and make things better? It seems quite strange to me that other countries do not seem to have so many government-related problems as we do.

Let's look at the facts. In most places in the US, decent broadband options (10mbs down, low ping) are limited and (due to lack of competition) expensive. At the same time, due to the regional monopolies the various ISPs and cable companies have established, they have significant power to filter, block, or prioritize Internet content. Both of these issues are problems that the market has not solved and, therefore, need to be addressed by government because it is the only other option.

Evidently, you don't want the government to get involved, and the only solution you have proposed is to move. Move where? To somewhere else in the US? Well, the problems mentioned above are pretty much universal in the US. How about to a European country with government-subsidized broadband Internet? Well, you cannot do that due to your feelings on government intervention. What now? Moving, IMO, is an incredibly weak option, especially when we have the means to make changes ourselves by *GASP* making new laws via the government.

Originally posted by chronomitch:Evidently, you don't want the government to get involved, and the only solution you have proposed is to move. Move where? To somewhere else in the US? Well, the problems mentioned above are pretty much universal in the US. How about to a European country with government-subsidized broadband Internet? Well, you cannot do that due to your feelings on government intervention. What now? Moving, IMO, is an incredibly weak option, especially when we have the means to make changes ourselves by *GASP* making new laws via the government.

Using new Goverment regulation to fight old Government regulation seems strange to me.

The US is different than most countries due to the geographical spread of the population; distances are greater here, and towns are more spread out as well.

Internet access is already universally available due to dial-up and satellite providers; if fiber Internet service becomes truly costly then other providers will be able to afford to run their own fiber. The "last mile" problem is mainly one of costs, after all.

Or, we could treat Internet access as a public utility and run fiber to every mountaintop hovel. The cost of that to the US government would be interesting.

I'm not sure that a tax increase to me for someone else to have (better) broadband access is a compelling argument.

I really don't see the problem with internet being a monopoly, or at least largely dominated, on a local scale, by a particular "company", if it is either A) a publically (city or state) owned utility, or B) A private company willing to accept very heavy regulation to ensure shareholder interest do not come before the public interest (namely affordable, pervasive, and neutral access to the internet).

I would, of course, prefer a proper utility, but B) is acceptable. What is not acceptable is having it be dominated by a national megacorp with enough power and money to have the rules changed for them.

A temporary fix we have found is to simply purchase a "business" connection. It's a bit more expensive, but you tend to actually get what they claim they are selling you. I do suspect they still throttle torrent traffic, but I suspect that will remain a problem until it is literally illegal, instead of just "discouraged". Discouraging (properly run) companies from doing something that may increase their profits is like trying to encourage water to run uphill.